Demand for Intel’s Atom processors is slowing as netbooks are starting to face increased price competition from value-end notebooks as well as the prospect of Intel CULV-based notebooks according to Digitimes. We saw direct evidence of this from Intel’s recent quarterly results, which showed a surprise drop in Atom revenues. At the time, Intel CEO, Paul Otellini, blamed this decline on a build-up of excess inventory, which is being cleared. It is believed that Intel is clearing its supply to Chinese vendors and second-tier netbook manufacturers.

The CULV (Consumer Ultra Low Voltage) platform is aimed at the ultra portable notebook segment in the $699 to $899 range. However, the lines between netbook and notebook are being blurred further as models with screen sizes from 11-inches to 13-inches are expected to be released.

In addition, PC makers may have been waiting for the release of more powerful Atom chips in the second half of the year and have slowed their purchases ahead of this release. This may be as manufacturers may be holding off for Nvidia’s Ion platform or price drops for Intel’s GN40 chipset.